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Hong Kong urged to match Singapore in green and sustainable financing subsidies to help revive debt offerings

  • Subsidies have helped borrowers cut expenses on debt offerings worth more than US$100 billion since scheme was launched in May 2021
  • Market players are calling on the city to extend its three-year programme; Singapore last year gave a similar scheme another five years

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Hong Kong has helped fuel a surge in bond sales tied to green and sustainable projects, spending HK$210 million to subsidise issuance costs. Photo: Shutterstock
Aileen Chuang
Hong Kong has helped fuel a surge in bond sales tied to green and sustainable projects, spending HK$210 million (US$26.9 million) to subsidise issuance costs. Market players are calling for an extension of the three-year incentive to rival those offered by Singapore.

The city has approved grants for issues including bonds and loans worth more than US$100 billion since the scheme was introduced in May 2021, according to the Financial Services and the Treasury Bureau. Sustainable bond and loan issues surged 42 per cent to US$80.5 billion in 2022, according to official data.

Those sales declined to about US$36 billion in 2023, according to a BNP Paribas estimate of mainland China offshore and Hong Kong issuances, as successive US rate hikes since the policy lift-off in March 2022 spiked up borrowing costs. With bets focused on rate cuts, industry experts said the subsidy plan will support an expected rebound in green bond offerings in 2024 and beyond.

“We hope the scheme can be extended because there’s a wider expectation of rate cuts in 2024,” said Chaoni Huang, head of sustainable capital markets for Asia-Pacific at BNP Paribas. “Trillions of dollars are required to support China’s net-zero targets. The grant scheme will be one of the tools to incentivise the market to do so.”

‘Trillions of dollars are required to support China’s net-zero targets, the grant scheme will be one of the tools to incentivise the market to do so,’ says Huang Chaoni, head of APAC sustainable capital markets at BNP Paribas.
‘Trillions of dollars are required to support China’s net-zero targets, the grant scheme will be one of the tools to incentivise the market to do so,’ says Huang Chaoni, head of APAC sustainable capital markets at BNP Paribas.

Under the scheme, the city’s government helps pay 50 per cent of the expenses up to a HK$2.5 million cap, and up to HK$800,000 on external review costs for each debt instrument. Some HK$210 million has been granted to build Hong Kong as a leading hub for such instruments in the region.

“We will review the effectiveness of the GSF Grant Scheme upon its expiry and consider the way forward as appropriate,” a spokesman for the bureau said.

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